Seller Funded Down Payment Assistance programs are being eliminated as allowable sources of down payment. As of December, 2007, FHA programs will still allow AmeriDream and Nehemiah Seller Funded Down Payment Assistance programs as acceptable down payment sources, but only until February 28, 2008 for AmeriDream. Fannie Mae and Freddie Mac do not accept Seller Funded Down Payment Assistance as acceptable down payment sources on their programs.

Down payment assistance providers Nehemiah Corp. of America, of Sacramento, Calif., and AmeriDream Inc., of Gaithersburg, Md., sued the government Sept. 30 and Oct. 1, respectively. U.S. District Judge Paul Friedman granted a preliminary injunction barring the Department of Housing and Urban Development from enforcing the new rule until he rules on the AmeriDream case.

The Nehemiah Program provides gift funds for down payment and closing costs to qualified homebuyers using an eligible loan program, such as FHA, that allows gifts from charitable organizations. Gift Funds of 1% to 6% of the final contract sales price can be received, depending on the particular needs of the homebuyer.

AmeriDream's Down Payment Gift program provides up to 10% in gift funds for down payment and closing costs to qualified homebuyers.

Fannie Mae, Freddie Mac and HUD believe that the costs to the Seller associated with these programs inflates the market price for the homes, but the program providers believe otherwise. Some companies have found loopholes in the program guidelines and are continuing to promote their down payment assistance programs as being acceptable sources of down payment as they originate through Native American tribes or represent "earned income" versus being sourced from Seller payments.

California and Florida homebuyers and sellers have been very active participants in these programs.

See you at the closing table!

Karen Cooper - OR/CA Mortgage Consultant - www.Quality4Loans.com